A look at the current day in European and global markets from Kevin Buckland
The once-invincible dollar was still on edge Tuesday after more macro evidence that the narrative of U.S. exceptionalism may be fading.
The dollar index hit a new two-month low in Asian hours, bringing its decline from Wednesday to more than 1%, following a flurry of weaker U.S. economic readings, lately a factory slowdown and a contraction surprise of construction work.
The big test comes Friday with monthly payrolls data, but a later labor market reading could also deal a blow to the dollar, in the form of the JOLTS report – a favorite of former Fed Chair Janet Yellen – which will predicts monster job openings falling to three-year lows.
Stock markets are unsure how to take the news, which on the one hand anticipates potential rate cuts from the Federal Reserve, but on the other hand sends a worrying signal about corporate earnings.
Not so the bond market, where yields are decidedly lower.
Since a coin flip a week ago, the odds are now 60:40 for a rate cut in September, according to CME Group’s FedWatch tool.
The Fed’s next meeting will be held Tuesday through Wednesday next week, and while it won’t lead to a policy change, the updated economic and rate projections will provide new insights for bettors.
Of course, the ECB meeting is just two days away and markets are primed for a hawkish cut. Inflation is rising again, making the outlook for potential policy easing later in the year unclear.
German unemployment is the only eurozone data of particular note today.
Switzerland, meanwhile, publishes the CPI. Inflation is rising here too, but economists and traders currently still lean slightly towards a rate cut this month, after the SNB became the first major central bank to kick off an easing cycle at the start of the year. ‘year.
Key developments that could affect markets on Tuesday:
-Unemployment in Germany (May)
-CPI Switzerland (May)
US JOLTS -Job Openings (April)
